Mega Group's Honea optimistic despite current economy
Clint Engel -- Furniture Today, March 28, 2011
Sonny Graugnard, left, Graugnard, Donaldsonville, La.; and Jerry Honea, Mega Group USA.
SAN ANTONIO — As Mega Group USA's Jerry Honea ticked off the economic and geopolitical headwinds that could put a crimp into a home furnishing industry recovery this year, it was enough to make you want to run for cover.
He started with the European debt crisis, the continuing violence and uprising in the Middle East, the end to government stimulus spending and the start of spending cuts. The latter "is probably going to shave half a point from GDP this year," Honea, Mega's chief operating officer, told members and vendors during his industry overview at the buying group's national convention this month.
"We are in an age of austerity, and it's going to last a while."
Then, there is the budget crisis faced by most states - a $1 trillion problem, he said - inflation, the stubbornly high unemployment rate and the woes of the housing industry, with an inventory of 3.7 million unsold homes that still needs to be absorbed.
Commodity prices have surged, including prices for cotton and other fabrics. Honea noted a new trend called "indeflation," which is when the value of things you own goes down (such as housing) while the prices on things you buy go up.
The list went on, and yet Honea expressed optimism for the industry. He said there is opportunity in the face of all these stresses. Those high-profile retail furniture bankruptcies and closings that members have been reading about - from Robb & Stucky to Lacks Stores to Roomful Express - could spell good news for other retailers, including Mega members.
"You're going to have less competition as time goes on because there are a lot less stores selling furniture and mattresses than there were five years ago," he said.
"I don't think there will be a whole lot more deterioration in the overall marketplace," Honea added, noting among other things that approval rates from GE Money, Mega's consumer creditor partner, are much better today than they were a couple of years ago. Consumer confidence also is up.
Among the other tailwinds that could propel the industry is the Federal Reserve's contention that large domestic banks have eased lending standards, although he said he has yet to see such loosening for those in the furniture industry.
The employment picture - though still lousy - has improved with 192,000 jobs created in February. But in order to sustain a "real recovery," Honea said that number is going to have to be more like 300,000 a month.
Consumer balance sheets are improving too, he said, and the federal government's $858 billion tax-cut deal is stimulating the economy even as the actual stimulus money has dried up.
"I definitely think we're off the bottom," he said. "I don't think the economy will double dip, but I'm concerned that housing will double dip.
Leather upholstery source D’Oro, a new supplier partner to Mega Group USA, showed about 40 pieces at the convention, including these allleather recliners with a steel seat box, hardwood frame and a wide seat base for stability, retailing for about $799.
"When (housing) turns, we're going to see a real wave of positive momentum," he said, adding that he believes a true recovery will begin some time in the second half.
Honea was optimistic at the conclusion of the show, reporting that several home furnishings suppliers reported record orders here, including Simmons, Fabrictech, England and Dream Fit.
-
'10 view: Slow growth
Jan 11, 2010 -
ISPA supports home furnishings tax credit
Feb 5, 2009 -
Mixed results for last year's forecast
Jan 18, 2011 -
Industry seen growing 4.8%
Jan 18, 2011 -
New Forecast Indicates Better Times on Horizon
Dec 16, 2010
Featured Company
-
FurnitureCore.com
FurnitureCore.com is a dynamic web application aimed at the furniture industry. Retailers and manufacturers alike will find our deep reserve of tools to be exactly what their furniture business needs.www.furniturecore.com... more
VIEW ALL GALLERIES
